Archive for March, 2018

The UK tax code, the laws that govern how much tax we pay, is one of the largest in the developed global economies. Unless you have a reasonable grasp of the multitude of tax rules and regulations, attempting to manage your own tax affairs is like driving with a blind-fold over your eyes.

HMRC are keen to befriend you, you are referred to as their “customer”. Whilst this is laudable, you will likely receive more flack from HMRC based on what is wrong with your tax affairs, rather than strategic options available to reduce your tax and NIC liabilities.

For example, there are reported to be two million couples who are eligible to transfer unused personal allowance (from one spouse not paying tax to the other who is paying tax). HMRC have enough data to automatically make this transfer on behalf of eligible couples, but you must make a claim, and many couples are unaware of this possibility.

HMRC seem to be a reactive organisation. They wait for you to make a mistake or send in a claim to reduce your taxes, before they will act.

Which is why professional advice makes sense. Advisors plug the information gap, they make sure you are kept up-to-date and any useful tax strategies are implemented in good time. It is, after all, what you don’t know that will trip you up.

If you are struggling to manage your own tax affairs we can help. Please call, we would be delighted to discuss your tax planning options. Take off the blindfold…

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HMRC have asserted that charities are missing out on up to £600m a year of funding due to donations not being confirmed under the Gift Aid rules.

They said:

The research, published today by HM Revenue & Customs (HMRC), shows that a third of eligible donations made to many of the UK’s 200,000 charities did not add Gift Aid when they could have done. This means that charities are losing out on extra funding worth nearly £600 million a year.

Gift Aid allows charities and community amateur sports clubs (CASC) to claim an extra 25p for every £1 donated. To add Gift Aid to a donation, you must have paid income or capital gains tax that year worth at least the value of the Gift Aid being added and give the charity permission to claim it. Gift Aid costs no extra to add on to your donation.

As a donor, you can only tick the Gift Aid box if you have paid income tax or capital gains tax in the same tax year of at least the amount of the Gift Aid claimed.

Charities will receive 25p from the government for every £1 donated under the Gift Aid scheme. Donors who pay tax at the basic rate will gain no additional tax benefit, however, donors who pay tax at the higher rates will be able to claim the higher rate elements on their tax returns.

The next time you are requested to complete a declaration when you donate or buy from a charity, take time to fill in the form. This will help the charity receive the extra government funding that is presently languishing in the Treasury’s coffers.

The only time you should decline is if you paid little or no tax, as this may result in a bill from the tax office.

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Firstly, the Chancellor’s announcement to Parliament last week was not a budget speech. There were no tax changes announced, in fact, the only change that was announced was to bring forward the expected business rates rebasing exercise one year, to April 2021.

He described his announcements as the first Spring Statement updating Parliament on the economy and other fiscal matters. Which means that the speech was full of the good news: increasing employment, rising GDP growth and manufacturing output, and falling inflation and government borrowing.

Although there were no formal changes to tax announced, the Chancellor did reveal several new consultations on tax issues. These are possible future changes about which HMRC is seeking outside commentary from “interested parties” before considering legislation. They include:

Reducing single-use plastic waste through the tax system. This will look at ways to reduce the impact of plastic waste in our environment such as disposable plastic cups, cutlery and foam trays. Some of the tax revenue raised will be used to fund research into new ways to encourage a more responsible use of plastic.

Making sure multinational digital businesses pay a fair share of tax. This is an ongoing attempt to ensure that the larger digital players pay tax in the UK on sales they make in the UK.

Seeking views on the role of cash in the new economy. Will cash become less relevant as digital payment processes become more widely used? This and the prevention of the use of cash to avoid tax and to launder the proceeds of criminal activity will be opened to a wider debate.

Supporting people to get the skills they need. Improving skills to benefit growth in the economy by investing in upskilling and retraining, especially by the self-employed.

There was much speculation and bluster in his presentation, but the Chancellor revealed little of substance. It will be some time before the outcome of the above consultations become law, perhaps some of the issues will be part of the Autumn Budget later this year.

Watch this space.

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According to recent press commentary, Ken Dodd married his long-time partner, Anne Jones, just two days before he died. With an estate estimated to be £7m, the executors were facing an Inheritance Tax bill of over £2m, but tying the knot means that assets transferred to Anne can now be made tax-free.

Many years ago, Ken brushed off tax evasion accusations by HMRC. He was accused of numerous counts of tax fraud, and although he settled tax arrears in full, including penalties, he was cleared by the jury in the court case of fraud.

Ken and Anne’s recent actions highlight the tax-free status of transactions between husband and wife, and civil partners. If the receiving spouse is domiciled in the UK, then any assets transferred on death or during life can be made with no liability to capital gains tax or inheritance tax.

As a bonus, Anne will see an uplift in the base cost of any assets subject to capital gains tax, that she receives from Ken’s estate.

For readers with significant estates, who find themselves in a similar position, being married, for tax purposes, is a compelling argument if you want to maximise the value of your after-tax estate for your family.

We offer advice on estate planning and would recommend that you consider your options sooner than two days from your expected demise. Being married is just one of many strategies that you can make to ensure your hard-won assets are protected from taxation on your death.

From April 2019, certain self-employed businesses will be required to file VAT returns direct to their online personal tax accounts with HMRC. Eventually, all income and allowances will be kept in the digital account that HMRC are setting up to calculate your tax liabilities. HMRC are still hedging their bets, but it is unlikely that business accounts information will need to be uploaded before April 2020.

How will this affect your tax affairs?

It will shift the emphasis from reporting historical data on a tax return or VAT return, to uploading real-time data to your personal tax account.

Banks, building societies, pension providers and employers will be required to “push” information to HMRC. And you will be obliged, in most cases, to upload quarterly information to HMRC on the profitability of your business or property letting income business.

Q: How will I have to send information; all I have is a spreadsheet?

A: The upload will have to be done electronically and if you already use bookkeeping software that we have recommended, this facility will be in place in good time. If you haven’t considered the use of accounts software, please call. We can help you get everything ready before the upload obligations begin from April 2019 when VAT returns will need to be filed in this way.

Q: How will I know if the information I am sending means I will pay too much tax or VAT?

A: Once the changes are fully implemented, certainly not before April 2020, we will be offering a service to check your accounts data for you before it’s uploaded. This check will also include a review of VAT uploads. We will also check your personal tax account at least once a year (at the end of each tax year) to make sure that the income tax liability assessed is correct. The year’s end review will include a look at ideas to reduce your tax bill, if appropriate planning opportunities are available.

If you are likely to be affected by these changes and are still undecided which accounts software to use, please call so that we can get you prepared.

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